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Tuesday, November 18, 2014

Samsung Plans to Make Fewer Smartphone Models in 2015

Profits are down, so Samsung is making plans to streamline their product offering in an effort to get the company’s financials back on track. Selling fewer smartphone models will be Samsung’s primary cost-cutting measure, reducing their current line-up by 25%-30% overall. This news comes on the heels of the heads up given to investors that the upcoming financial results will show a considerable 74% drop in mobile profits during the third quarter of this year.

If successful, Samsung will find its way back to a double-digit percentage margin:

“After maintaining smartphone operating-profit margins above 15% for 10 consecutive quarters, Samsung’s margins from its mobile and information technology business were squeezed to just 7% in the third quarter ended September—the lowest level since the end of 2008, before it launched its first Galaxy smartphone. Acknowledging the slide in margins, Samsung executives said during an earnings call last month that its new goal is to maintain a sustainable double-digit percentage margin starting in the new year. They reiterated that pledge during this week’s investor day meeting.”

Less hardware diversity means being able to share more components across devices (particularly in the mid-to-low-end models), allowing Samsung to maximize profits while they “further leverage economies of scale.”

Fewer smartphones should also make it easier for consumers to decide which device they want (not to mention making it more clear when their existing device is out of date and in need of an upgrade).

Now before people worry too much about Samsung as a whole, don’t forget that they have a lot of other irons in the fire.